Introduction to Competition
Policy & Law
Cornelius Dube
National Training Workshop
under the 7up4 Project
What is Competition?

The process of rivalry between firms striving to gain sales and make profits

Motive: self-interest, but outcome mostly beneficial for the society

Competition is not just an event, but a process
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It is not automatic – needs to be nurtured
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Benefits from Competition

Efficiency and Innovation

Economic growth (private sector development)
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Consumer welfare gains
 Lower prices,
 better quality,
 More choice
 Easy access
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What is competitiveness?

It is a comparative concept

Refers to ability and performance of a firm, sub-sector or country to sell
and supply goods and/or services in a given market.

Focus is not on how that ability arose, whether fair or unfair becomes a
competition issue.

Firm competitiveness compares a firm with its rivals in terms of ability and
supply terms for goods.

National competitiveness captures the awareness and preparedness of a
country to challenges posed by global competition
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Competition Reforms
Promoting
Competition
COMPETITION
POLICY
COMPETITION
REFORMS
COMPETITION LAW
Curbing Anticompetitive
Practices
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Impediments to Competition?



Government Policy
 Difficult entry/exit conditions
 Non-transparent public procurement
 Implications of other policies
Anti-competitive Practices
 Restrictive Business Practices
 Unfair Trade Practices (misleading advert, tied-selling, false claims,
etc.)
Lack of awareness and understanding
 Lack of buy-in among policymakers
 Absence of public demand and support
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Competition Policy

National Competition Policy Statement




Government commitment to promote competition in all sectors
Could result in refinement of other policies (trade policy, industrial
policy, investment policy, public procurement policy, etc.)
Ideally, a precursor to a competition law
Very few countries have a national competition policy (e.g., Australia,
Botswana, Mozambique, etc.)
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Competition Law

Sub-set of Competition Policy

Aims to protect process of competition and not competitors

Consist of a set of rules to curb ACPs

Sets up the Competition Authority

Over 120 countries have adopted

National and Regional Competition Law

Often Competition Policy and Competition Law used interchangeably –
NOT CORRECT
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Provisions under a Competition Law

Anti-competitive practices prohibited fall under three categories:



Anticompetitive agreements (all laws)
Abuse of Dominance (all laws)
Anticompetitive Mergers (most laws)

Competition Advocacy is also provided for (many laws)

Competition authorities are also set up under a competition law

Administrative issues governing the operations of the competition
authorities
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Competition Authority

Agency created as per the provisions of the Competition Law

Legislated structure and functions

Main functions – investigative (Competition Commission) and sometimes
adjudicative (Competition Tribunal)

Need to maintain functional autonomy, and be accountable

Try to gain public support for its actions

Perform the function of competition advocacy effectively and promote
competition culture

Cooperate with other regulatory agencies
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Anticompetitive agreements



Are of two types: Horizontal agreements and Vertical agreements
Horizontal agreements- firms in same business (competitors) agreeing not
to compete
Includes cartel agreements which are prohibited



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Bid rigging agreements
Output restrictions
Price fixing
Market allocation
Vertical agreements involve firms enjoying a supplier customer
relationship



Exclusive supply/purchase agreements
Tie-ins
Resale price maintenance
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Abuse of dominance


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A firm in a dominant position prohibited from abusing the position
Occurs in two ways: Exploitative and exclusionary practices
Exploitative practices are those meant to exploit customers of the dominant
firm




Excessive pricing
Discrimination
Tied selling
Exclusionary practices are those aimed at driving competitors out of
business
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

Predatory pricing
Refusal to deal
Hoarding raw materials
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Anticompetitive mergers and Acquisition

Firms may try to cheat competition through mergers.

Three types of mergers: Horizontal; vertical and conglomerate

Horizontal mergers involve competitors and most harmful to competition
as they reduce the number of players

Vertical mergers include firms in a supplier-customer relationship and can
result in foreclosure

Conglomerate mergers involve firms in different lines of business, and the
fear is the “deep pockets” concern where firms become so huge with big
financial resources which they can abuse.
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Competition Enforcement and Consumer
Welfare
ACCESS
QUALITY
Consumer
Welfare
CHOICE
PRICE
Market Allocation
Cartel restricting access
Poor quality
goods/services by a firm
abusing dominant
position
Tied-selling restricting
consumer choice
Competition
Authority’s
Enforcement
Actions
Price-fixing cartel
leading to excessive
prices
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Conclusions

Competition enforcement leads to consumer welfare

National stakeholders need to recognise their role in promoting competition

Competition agencies in DC and LDCs need to strengthen their
communication/dissemination functions

Policymakers/Government need to prioritise competition reforms

Development partners/donors need to support the process
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THANK YOU!
cd@cuts.org
www.ccier-cuts.org
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